The long-term goal of this research is to elucidate the mechanisms whereby cells integrate instructions from multiple signaling pathways and respond in a context-appropriate manner. In this context, post-translational modifications such as phosphorylation and dephosphorylation provide versatile strategies for dynamically modulating transcription factor activity in response to specific signaling inputs. However the mechanisms whereby such modifications coordinately regulate transcription factor function, interactions with the basal transcription machinery, and alterations in chromatin structure to achieve a context-specific output remain poorly understood. Drosophila is particularly well-suited to addressing complex developmental questions because of the ease with which genetic, molecular, biochemical, cell biological and genomic approaches can be combined. Because developmental signaling mechanisms have been highly conserved in evolution, knowledge of the molecular circuitries used in Drosophila will fundamentally advance our understanding of how cell fates are designated and maintained, and why misregulation results in cancer and disease in mammals. [unreadable] [unreadable] This proposal addresses the hypothesis that nuclear tyrosine phosphatase activity, mediated by a dual function transcription factor and phosphatase, provides a novel strategy for transcriptional regulation and signal integration. The specific aims are to define a new function for the transcriptional coactivator Eyes absent as a phosphatase, to determine how phosphatase activity is regulated and coordinated with transcriptional functions, and to investigate the physiological context in which Eyes absent participates in nuclear phosphorylation and dephosphorylation events. Given the extent of evolutionary conservation of the proteins studied in this proposal, this work will provide novel insights into fundamental signaling mechanisms underlying human development and disease. [unreadable] [unreadable]